**EXHIBIT10.46****SEVERANCE AND CHANGE IN CONTROL AGREEMENT**     This**Severance and Change in Control Agreement** (the **“Agreement”**) is made and enteredinto effective as of November 13, 2006, (the **“Effective Date”**), by and between **AnadysPharmaceuticals, Inc.**, a Delaware corporation (the **“Company”**), and**James T. Glover**(the **“Executive”**). The Company and the Executive are hereinafter collectively referred to asthe **“Parties”**, and individually referred to as a **“Party”**.**AGREEMENT**     In consideration of the mutual promises and covenants herein contained, and for other good andvaluable consideration, the Parties, intending to be legally bound, agree as follows:     **1.Employment.     **1.1 Loyalty; At Will Employment**. During the Executive’s employment by the Company, theExecutive shall devote Executive’s full business energies, interest, abilities and productivetime to the proper and efficient performance of Executive’s duties as an officer of theCompany. Executive’s employment with the Company is at-will and not for any specified periodand may be terminated at any time, with or without cause, by either Executive or Company,subject to the provisions of Sections 3 and 4 below.     **1.2 Termination of Obligations**. In the event of the termination of the Executive’semployment with the Company, the Company shall have no obligation to pay Executive any basesalary, bonus or other compensation or benefits, except as earned prior to the date oftermination or as provided in Sections 3 and 4 or for benefits due to the Executive (and/orthe Executive’s dependents) under the terms of the Company’s benefit plans. The Company mayoffset any amounts Executive owes it or its subsidiaries against any amount it owes Executivepursuant to Sections 3 or 4.     **1.3**The term of this Agreement (the ***“Term”***) shall begin on the Effective Date and shallcontinue until Executive’s employment with the Company is terminated for any reason.     **2.Definitions.          For purposes of this Agreement, the following terms shall have the following meanings:     **2.1 Complete Disability**. **“Complete Disability”**shall mean the inability of the Executiveto perform the Executive’s duties under this Agreement because the Executive has becomepermanently disabled within the meaning of any policy of disability income insurance coveringemployees of the Company then in force. In the event the Company has no policy of disabilityincome insurance covering employees of the
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Company in force when the Executive becomes disabled, the term **“Complete Disability”**shall mean the inability of the Executive to perform the Executive’s duties under thisAgreement by reason of any incapacity, physical or mental, which the Board, based upon medicaladvice or an opinion provided by a licensed physician acceptable to the Board, determines tohave incapacitated the Executive from satisfactorily performing all of the Executive’s usualservices for the Company for a period of at least one hundred twenty (120) days during anytwelve (12) month period (whether or not consecutive). Based upon such medical advice oropinion, the determination of the Board shall be final and binding and the date suchdetermination is made shall be the date of such Complete Disability for purposes of thisAgreement.     **2.2 Good Reason. “Good Reason”**for the Executive to terminate the Executive’s employmenthereunder shall mean the occurrence of any of the following events without the Executive’sconsent:               **(i) **a material adverse change in the nature or scope of Executive’s job responsibilities, orin the case of a Change of Control, the failure to be offered a substantially equivalent positionwith the successor entity;               **(ii) **the relocation (or demand for relocation) of Executive’s place of employment to a pointmore than thirty (30) miles from Executive’s then current place of employment; and               **(iii) **a reduction in the annual base compensation paid to Executive, without Executive’sconsent; provided, however, that a reduction in Executive’s compensation occurring as part of aCompany-wide similar reduction of salary for similarly-situated executives shall not constituteGood Reason.     **2.3 For Cause**. **“Cause”**for the Company to terminate Executive’s employment hereundershall mean the occurrence of any of the following events:               **(i) **the Executive’s willful or grossly negligent failure, as determined in good faith by theBoard of Directors, to satisfactorily perform the Executive’s assigned duties with the Company, orany successor thereof, in the best interest of the Company and as directed by the Company’s Boardof Directors or the Chief Executive Officer (except for the failure resulting from Executive’sincapacity due to Complete Disability, or, for the purposes of Section 4.1.1 only, any such actualor anticipated failure resulting from a Good Reason termination) which is not corrected withinthirty (30) days of receiving notice of such failure from the Company specifying in reasonabledetail the nature of such failure;               **(ii) **the Executive’s commission of a negligent or willful act that materially injures thebusiness of the Company;               **(iii) **the Executive’s conviction of a felony involving moral turpitude; and               **(iv) **the Executive’s engaging or in any manner participating in any activity which is directlycompetitive with or injurious to the Company or any of its affiliates or
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which violates any material provisions of the Executive’s Agreement for Employees datedSeptember 25, 2006 (proprietary information and inventions agreement) with the Company.     **2.4 Change in Control.**For purposes of this Agreement, ***“Change in Control”***means:               **(i) **an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d)of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan,or related trust, sponsored or maintained by the Company or subsidiary of the Company or otherentity controlled by the Company) of the beneficial ownership (within the meaning of Rule 13d-3promulgated under the Exchange Act, or comparable successor rule) of securities of the Companyrepresenting more than fifty percent (50%) of the combined voting power of the Company’s thenoutstanding securities other than by virtue of a merger, consolidation or similar transaction.Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because thelevel of ownership held by a person, entity or group exceeds the designated percentage threshold ofthe outstanding voting securities as a result of a repurchase or other acquisition of votingsecurities by the Company reducing the number of shares outstanding, provided that if a Change inControl would occur (but for the operation of this sentence) as a result of the acquisition ofvoting securities by the Company, and after such share acquisition, a person, entity or groupbecomes the owner of any additional voting securities that, assuming the repurchase or otheracquisition had not occurred, increases the percentage of the then outstanding voting securitiesowned by such person, entity or group over the designated percentage threshold, then a Change inControl shall be deemed to occur;               **(ii) **there is consummated a merger, consolidation or similar transaction involving (directlyor indirectly) the Company and, immediately after the consummation of such merger, consolidation orsimilar transaction, the stockholders of the Company immediately prior thereto do not own, directlyor indirectly, outstanding voting securities representing more than fifty percent (50%) of thecombined outstanding voting power of the surviving entity in such merger, consolidation or similartransaction or more than fifty percent (50%) of the combined outstanding voting power of the parentof the surviving entity in such merger, consolidation or similar transaction; or               **(iii) **there is consummated a sale or other disposition of all or substantially all of theconsolidated assets of the Company and its subsidiaries, other than a sale, lease, license or otherdisposition of all or substantially all of the consolidated assets of the Company and itssubsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the votingsecurities of which are owned by stockholders of the Company in substantially the same proportionsas their ownership of the Company immediately prior to such sale, lease, license or otherdisposition.     **2.4 Integration**. The parties acknowledge that the definition of “for Cause”contained within this Agreement may differ from the definitions of “for Cause” contained withinExecutive’s stock option agreement or agreements. Accordingly, the Parties agree that unless it
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is determined that Executive shall be terminated for Cause as defined in this Agreement, thereshall be no termination for Cause under any of Executive’s stock option agreements.     **3.Severance.     **3.1 Benefits.**               **3.1.1**Except as provided in Section 4.1.1, in the event that Executive’s employment with theCompany is terminated by the Company without Cause within the twelve (12) month period immediatelyfollowing Executive’s first day of employment with the Company, then upon the Executive’s deliveryto the Company of an effective Release and Waiver of Claims, attached hereto as **Exhibit A**, theExecutive shall be entitled to the equivalent of nine (9) months of the Executive’s annual basesalary in effect at the time of termination, less standard deductions and withholdings, which shallbe paid as soon as administratively practicable but no later than sixty (60) days aftertermination.               **(i) **In addition, in the event that Executive would otherwise owe to the Company thereimbursement of a pro rata portion of his sign-on bonus/relocation assistance, such reimbursementshall not be required if the provisions of this Section 3.1.1 apply.     **4.Change in Control.     **4.1 Benefits.**               **4.1.1**In the event that Executive’s employment with the Company is terminated without Cause orfor Good Reason within the sixty (60) day period immediately preceding or the twelve (12) monthperiod immediately following a Change in Control of the Company, then upon the Executive’s deliveryto the Company of an effective Release and               Waiver of Claims, attached hereto as **Exhibit A**, the Executive shall be entitled to:               **(i) **The equivalent of nine (9) months of the Executive’s annual base salary in effect at thetime of termination, less standard deductions and withholdings, which shall be paid as soon asadministratively practicable, but no later than sixty (60) days after termination, unless Section4.2 below applies; and               **(ii) **Accelerated vesting of all unvested shares subject to any outstanding stock options thenheld by Executive, such that all shares shall be vested and fully exercisable as of the date ofExecutive’s termination.               **(iii) **In addition, in the event that Executive would otherwise owe to the Company thereimbursement of a pro rata portion of his sign-on bonus/relocation assistance, such reimbursementshall not be required if the provisions of this Section 4.1 apply.     **4.2 Application of Internal Revenue Code Section 409A**. If the Company determines thatthe benefits payable under Section 4.1.1(i) of this Agreement fail to satisfy the distributionrequirement of Section 409A(a)(2)(A) of the Internal Revenue
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Code as a result of Section 409A(a)(2)(B)(i) of the Internal Revenue Code, the payment ofsuch benefits shall be delayed to the minimum extent necessary so that such benefits are notsubject to the provisions of Section 409A(a)(1) of the Internal Revenue Code.     **4.3 Parachute Payment.**If any payment or benefit Executive would receive pursuant aChange in Control or otherwise (“Payment”) would (i) constitute a “parachute payment” withinthe meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to theexcise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall bereduced to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portionof the Payment that would result in no portion of the Payment being subject to the Excise Taxor (y) the largest portion, up to and including the total, of the Payment, whichever amount,after taking into account all applicable federal, state and local employment taxes, incometaxes, and the Excise Tax (all computed at the highest applicable marginal rate), results inExecutive’s receipt, on an after-tax basis, of the greater amount of the Paymentnotwithstanding that all or some portion of the Payment may be subject to the Excise Tax. Ifa reduction in payments or benefits constituting “parachute payments” is necessary so that thePayment equals the Reduced Amount, reduction shall occur in the following order unlessExecutive elects in writing a different order (*provided, however,*that such election shall besubject to Company approval if made on or after the effective date of the event that triggersthe Payment): reduction of cash payments; cancellation of accelerated vesting of stock awards;reduction of employee benefits. In the event that acceleration of vesting of stock awardcompensation is to be reduced, such acceleration of vesting shall be cancelled in the reverseorder of the date of grant of Executive’s stock awards unless Executive elects in writing adifferent order for cancellation.     The Company shall engage a nationally recognized accounting or consulting firm to perform theforegoing calculations. If the firm so engaged by the Company is serving as accountant or auditorfor the individual, entity or group effecting the Change in Control, then the Company shall appointanother nationally recognized accounting or consulting firm to make the determinations requiredhereunder. The Company shall bear all expenses with respect to the determinations by such firmrequired to be made hereunder.     The firm engaged to make the determinations hereunder shall provide its calculations, togetherwith detailed supporting documentation, to Executive and the Company within fifteen (15) calendardays after the date on which Executive’s right to a Payment is triggered (if requested at that timeby Executive or the Company) or such other time as requested by Executive or the Company. If thefirm determines that no Excise Tax is payable with respect to a Payment, either before or after theapplication of the Reduced Amount, it shall furnish Executive and the Company with an opinionreasonably acceptable to Executive that no Excise Tax will be imposed with respect to such Payment.Any good faith determinations of the firm made hereunder shall be final, binding and conclusiveupon Executive and the Company.     **5.General. This Agreement is made in San Diego, California. This Agreementshall be construed and interpreted in accordance with the internal laws of the State of California.This Agreement supercedes and replaces any other agreement between Executive and the
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Company regarding change in control benefits and cannot be amended or modified except bywritten agreement between Executive and the Company. This Agreement may be executed in twocounterparts, each of which shall be deemed an original, all of which together shall contribute oneand the same instrument.     **In Witness Whereof, the Parties have executed this Agreement as of the date firstabove written.     **AnadysPharmaceuticals, Inc.       **BY:****************